With no down payment required, flexible credit guidelines and limits on closing costs and fees, Department of Veterans Affairs home loans are a popular financing option for veterans and active-duty service members.
In the past, National Guard members were only eligible for the VA loan after six years of honorable service, following 90 consecutive days of service or after being discharged from active duty for a service-related disability.
But a law passed in 2021 made tens of thousands more National Guard members eligible for the VA home loans. The legislation expanded eligibility for Guard members and reduced the required days of service.
The law is retroactive, meaning Guard members who served years ago but meet the new criteria may now be able to tap into the VA loan benefit
Veterans, Active Duty and Surviving Spouses Also Eligible
Veterans, active-duty service members and surviving spouses continue to be eligible for VA loans. There are minimum active-duty service requirements that veterans and military personnel must meet to be eligible. These requirements can vary depending on when you served and whether your service took place during peacetime or wartime.
If you were discharged for a service-related disability, there are no minimum active-duty requirements. Surviving spouses of members of the armed forces can be eligible for VA loans as well.
Benefits of VA Loans
VA loans make buying or refinancing a home more affordable for the men and women who served. The benefits of VA loans include:
Competitive interest rates
Because the Department of Veterans Affairs backs VA loans, lenders can often offer veterans interest rates that are competitive with -- or lower than -- the rates available on other mortgage types.
More flexible credit terms
Most lenders require a minimum credit score between 620 and 640 for VA loans. This number is taken from the borrower's FICO number, which ranges from 300 to 850. The higher the number, the better the credit.
Zero down payment
FHA loans and conventional loans usually require at least 3.5% to 5% down. However, veterans can buy a home with no down payment using a VA loan.
No mortgage insurance
For a conventional loan, meaning a mortgage that's eligible to be backed by Fannie Mae and Freddie Mac, a buyer typically needs to put down 20% to avoid paying for mortgage insurance. VA loans do not require monthly mortgage insurance. They do require a VA funding fee, which serves a similar purpose.
Limits on closing costs
VA loan rules require the home's seller to pay commissions for real estate professionals, brokerage fees and buyer broker fees.
No prepayment penalties
There are no penalties or fees for paying off VA loans sooner than the terms require.
No limits on the number of times you can use a VA loan
There are no limits on the number of times a veteran can use VA loans to buy or refinance homes. However, there are some restrictions. Veterans can have only one VA loan at a time and are limited to buying or refinancing their primary residence.
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